Given the market circumstances at present, particularly when it comes to mortgage cost and availability, that link is likely to solidify in the months and years ahead, as older homeowners look at the ways they can help their offspring bridge the gap from wannabe to actual first-time buyers.
It’s undeniable that the market situation has changed for many first-timers in recent weeks with an increase in mortgage rates across the board, and the fall in the number of higher LTV mortgage products, potentially shifting their position from one where they were able to make their move to one where they may have to hit the pause button.
Equity release may be FTB answer
Added to this, of course, are a number of changes to government schemes that are impacting first-timers. First up, the Help to Buy scheme is no more, while the government’s Guarantee Scheme to support the provision of high LTV mortgages is due to finish at the end of 2022.
Now there are already some alternatives to Help to Buy running, perhaps most notably Deposit Unlock, but they are – at least in this early stage – unlikely to hit anywhere near the numbers that have been through Help to Buy.
And, of course, many lenders were already offering high LTV mortgage products without being involved in the Guarantee Scheme although, as mentioned, there has been a sharp tail-off in their number in recent weeks.
The situation will leave many first-timers wondering what to do next, and many will be turning to family members in order to help them span the deposit gap, perhaps in order to secure a lower LTV mortgage that is more affordable over the short term.
We’re fully aware that equity release or RIO or mortgages for older borrowers are not going to be the right option for everyone. There are other ways to support including gifting through savings or acting as a guarantor, but for a certain homeowner and borrower demographic, the later life lending option might be one to explore which will provide a potential lifeline to family members who, without it, are not going to be able to go ahead with a purchase.
Advisers make the equity release move
In this scenario, it may well be that the adviser is able to offer later life lending advice themselves, that they have the necessary expertise, qualifications or experience but for many purely active in the mainstream residential space, this is not going to be an option available to them.
As demand for later life lending grows, and as it becomes more understood, accessible and accepted, I suspect firms who are not currently active in the space will be looking to expand into it. In fact, we’ve already seen this in recent months and years as advisory firms work with Air in order to add this particular string to their bow.
However, that demand exists right now, and therefore for those firms not in a position to do this, it makes perfect sense to form partnerships with seasoned later life advice specialists right now, to help marry up the needs of their first-time buyer clients with the product and service options available to those older homeowners who do want to access their equity and help out their family members. Again, we can help smooth this particular path.
Finding pathways for FTBs
I read a number of recent commentators suggesting the current mortgage market situation for first-time buyers was as bad as it could be, however, for our sector it’s about exploring all the possible solutions that might exist, one of which may well be releasing equity via a later life lending option.
Products like equity release have evolved significantly over the last few years and many include the ability to make ad hoc capital payments, and ongoing interest payments. With early repayment charges finishing after as little as five years, older homeowners have more flexibly than ever before when it comes to supporting the younger generation with their housing ambitions.
It’s therefore important advisers have access to this sector and the product solutions available, either through their own advice or by introducing clients to one of the many specialists active already. Together they may well be able to turn what seems like a lost cause into a happy first-timer.
